Category Archives: Collapse

Bailout Arrives: Credit Suisse To Borrow $54BN From SNB To “Pre-emptively Strengthen Liquidity”, by Tyler Durden

Posted on March 16, 2023 | 1 comment

The EU banking system is in worse shape than the U.S. banking system and Credit Suisse is the EU poster child. For the disturbing details, put Alasdair Macleod in the SLL search function and start reading. From Tyler Durden at zerohedge.com:

Summary: 

  • Saudis fold – refuse to throw any more money at Credit Suisse
  • Credit Suisse stock hits record low
  • Credit Suisse 1Y CDS explodes as counterparty risk hedging soars
  • Credit Suisse execs urged a “show of confidence” from the Swiss National Bank
  • ECB quantifying exposures to Credit Suisse
  • US Treasury monitoring situation, talking with other regulators
  • Fed working with UST to quantify exposures
  • One major govt is pressuring Swiss to intervene
  • Systemic risk threat spreads globally
  • Swiss authorities seeking to stabilize bank
  • Swiss National Bank and Finma issue statement of support
  • Credit Suisse said it’s planning to borrow from the Swiss National Bank up to CHF50 billion under a covered loan facility.

Update (21:00ET): And so, the “bailout” arrives just a few hours before the Europe open, Credit Suisse said it’s planning to borrow from the Swiss National Bank up to CHF50 billion ($54 billion) under a covered loan facility which is “fully collateralized by high quality assets”. It wasn’t immediately clear what high quality assets CS has left to pledge but in a time of BTFP, we are confident they found something. 

The bank also announced  offers by Credit Suisse International to repurchase certain OpCo senior debt securities for cash of up to about CHF3 billion, which will help the bank pick up a few pennies in bond discount, even as it faces tens of billions in deposit flight.

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Funny Things Happen on the Way to “Restoring Financial Stability”, by Charles Hugh Smith

Posted on March 16, 2023 | Leave a comment

This is not funny “ha-ha.” From Charles Hugh Smith at oftwominds.com:

We can also predict that the next round of instability will be more severe than the previous bout of instability.

Everyone is in favor of “doing whatever it takes” to “restore financial stability” when the house of cards starts swaying, but funny things happen on the way to “Restoring Financial Stability.” Whatever “emergency measures” are rushed into service to “stabilize” an inherently unstable system resolve the immediate problem but opens unseen doors to new sources of instability that eventually trigger another round of systemic instability that must be addressed with more “emergency measures.”

These unintended consequences proliferate as policy extremes are pushed to new extremes, and “emergency measures” become permanent sources of the very instability they were supposed to eliminate.

As @concodanomics recently observed on Twitter: “A major flaw of finance is that it nearly always mutates the very instruments meant to protect investors into crisis-inducing time bombs.”

Another major flaw in finance is the self-serving pressure applied by politically influential players to “enable innovation,” a.k.a. new opportunities for skims and scams. The usual covers for these “innovations” are 1) deregulation (“growth” will result if we let “markets” self-regulate) and 2) technology (generating guaranteed profits by front-running the herd is now technically possible, so let’s make it legal).

Broadening the pool of punters who can be skimmed and scammed is also a favored form of financial “growth” and “innovation.” “Democratizing markets” was the warm and fuzzy cover story for enabling everyone with a mobile phone to dabble in risk-on gambles with margin accounts (cash borrowed against a portfolio of stocks).

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What Happens When the Government Breaks Its Own Laws? By Andrew Napolitano

Posted on March 16, 2023 | 2 comments

When the answer is nothing, the nation collapses. From Andrew Napolitano at lewrockwell.com:

Five members of the Proud Boys are currently on trial for sedition in federal court in Washington, D.C. Sedition is a conspiracy to overthrow the federal government by the use of force. This case stems from the events of Jan. 6, 2021 at the U.S. Capitol. During the trial, an FBI agent inadvertently admitted that she was asked to doctor and to destroy evidence, and that her colleagues have spied on defense lawyers in the case.

The Department of Justice has pursued the defendants in Jan. 6-related matters with much zeal. The current Proud Boys trial, however, exceeds anything that has recently been revealed.

Here is the backstory.

A conspiracy is an agreement by two or more persons to commit a crime that they are able to commit in which at least one of those who embraced the agreement took at least one step in furtherance of it.

Prosecutors love conspiracy cases because they are easy to prove. Yet, every modern definition of crime includes an element of harm. Since conspiracy is essentially a thought crime, the courts have dispensed with the element of harm. Stated differently, the government needs only prove the existence of the agreement and the single step in furtherance of its consummation. The government need not prove harm.

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Unsound Banking: Why Most of the World’s Banks Are Headed for Collapse, by Doug Casey

Posted on March 16, 2023 | 1 comment

The banking system is set up to fail. From Doug Casey at internationalman.com:

Bank collapse

You’re likely thinking that a discussion of “sound banking” will be a bit boring. Well, banking should be boring. And we’re sure officials at central banks all over the world today—many of whom have trouble sleeping—wish it were.

This brief article will explain why the world’s banking system is unsound, and what differentiates a sound from an unsound bank. I suspect not one person in 1,000 actually understands the difference. As a result, the world’s economy is now based upon unsound banks dealing in unsound currencies. Both have degenerated considerably from their origins.

Modern banking emerged from the goldsmithing trade of the Middle Ages. Being a goldsmith required a working inventory of precious metal, and managing that inventory profitably required expertise in buying and selling metal and storing it securely. Those capacities segued easily into the business of lending and borrowing gold, which is to say the business of lending and borrowing money.

Most people today are only dimly aware that until the early 1930s, gold coins were used in everyday commerce by the general public. In addition, gold backed most national currencies at a fixed rate of convertibility. Banks were just another business—nothing special. They were distinguished from other enterprises only by the fact they stored, lent, and borrowed gold coins, not as a sideline but as a primary business. Bankers had become goldsmiths without the hammers.

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Is The U.S. Banking System Safe – 15 Years Later, by Jim Quinn

Posted on March 15, 2023 | 1 comment

The more things change, the more they stay the same. From Jim Quinn at theburningplatform.com:

“We’ve got strong financial institutions…Our markets are the envy of the world. They’re resilient, they’re…innovative, they’re flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong.” – Henry Paulson – 3/16/08

The next financial crisis: Why it looks like history may repeat itself
Silicon Valley Bank is shut down by regulators in biggest bank failure since global financial crisis

“I have full confidence in banking regulators to take appropriate actions in response and noted that the banking system remains resilient and regulators have effective tools to address this type of event. Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out . . . and the reforms that have been put in place means we are not going to do that again.” – Janet Yellen – 3/12/23

With the recent implosion of Silicon Valley Bank and Signature Bank, the largest bank failures since 2008, I had an overwhelming feeling of deja vu. I wrote the article Is the U.S. Banking System Safe on August 3, 2008 for the Seeking Alpha website, one month before the collapse of the global financial system. It was this article, among others, that caught the attention of documentary filmmaker Steve Bannon and convinced him he needed my perspective on the financial crisis for his film Generation Zero. Of course he was pretty unknown in 2009 (not so much anymore) , and I continue to be unknown in 2023.

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A Mile-High House of Cards… 3 Ways to Protect Yourself Before Your Bank Collapses, by Nick Giambruno

Posted on March 14, 2023 | Leave a comment

Cash, gold and silver, and Bitcoin are going to be salvation for a lot of people during the next financial crises. From Nick Giambruno at internationalman.com:

The Truth About Your Bank Deposits

It’s hard to think of a topic where following conventional wisdom is more dangerous than banking.

The general public and most financial experts accept as absolute truth that putting your money in a bank is safe and responsible. After all, the government insures your deposits, so if anything were to go wrong…

As a result, most people put more thought into the shoes they purchase than the bank they entrust with their life savings.

However, the banking system is a mile-high house of cards that could collapse anytime.

Here are three reasons why.

Reason #1: Government Deposit Insurance Is a False Sense of Security

The Federal Deposit Insurance Corporation (FDIC) insures bank deposits in the US.

When a bank fails, the FDIC pays depositors up to $250,000. The FDIC has a reserve of around $126 billion for this purpose.

Now, $126 billion is a lot of money. But, considering there are around $9.8 trillion in insured deposits in the US, $126 billion is just a drop in the bucket, around 1.3%, to be exact.

In other words, the FDIC’s reserve has around one penny for every dollar of deposits it insures.

It wouldn’t take much to wipe out the FDIC’s reserves. One large bank failure and the FDIC itself could go bust.

For example, the recently failed Silicon Valley Bank—the largest bank failure since the 2008 crisis—had around $210 billion in customer deposits. That’s $84 billion more than the FDIC’s entire reserve.

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The Sea Gypsy Tribe Encyclopedia

Posted on March 14, 2023 | 3 comments

Escaping the woes that beset humanity in a sailboat somewhere in the South Pacific doesn’t sound too bad. From Ray Jason at theseagypsyphilosopher.com:

For more than a decade I have been promoting a concept that I call The Sea Gypsy Tribe. The idea is that Humanity is living in an increasingly chaotic world with the possibility of extreme catastrophes looming just beyond the stormy horizon.

I firmly believe that the best way to escape from any type of emergency, is in a well-prepared, ocean-capable sailboat, along with a small group of like-minded sailors in their boats. During the last 10 years at my blog, in about a dozen essays, I have carefully described various disasters and then explained how sailing vessels can effectively respond to them.

My sincere hope is that none of us ever have to deal with such extreme situations. It would be terrific if none of us ever had to react to a currency collapse or a cyber attack or a balloon armed with an EMP! But a wise, old mariner once advised me to “Hope for the best, but prepare for the worst!”

Since I receive inquiries from cruisers all around the world, I decided to collate together the many reasons that I believe the sea gypsy life is ideal in shielding one from natural or human-caused disasters.

Therefore, I am creating this Sea Gypsy Tribe Encyclopedia. It will be spread out across a few essays. Initially, I will randomly choose the topics for discussion, but eventually, they will all be alphabetized like an encyclopedia. But don’t be alarmed – it will not be some massive tome. Instead, it will be a longish essay divided into a few segments. Let’s begin!

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If SVB is insolvent, so is everyone else, by Simon Black

Posted on March 14, 2023 | Leave a comment

Financial crises stem from too much debt and too much financial interconnection. From Simon Black at sovereignman.com:

On Sunday afternoon, September 14, 2008, hundreds of employees of the financial giant Lehman Brothers walked into the bank’s headquarters at 745 Seventh Avenue in New York City to clear out their offices and desks.

Lehman was hours away from declaring bankruptcy. And its collapse the next day triggered the worst economic and financial devastation since the Great Depression.

The S&P 500 fell by roughly 50%. Unemployment soared. And more than 100 other banks failed over the subsequent 12 months. It was a total disaster.

These bank, it turned out, had been using their depositors’ money to buy up special mortgage bonds. But these bonds were so risky that they eventually became known as “toxic securities” or “toxic assets”.

These toxic assets were bundles of risky, no-money-down mortgages given to sub-prime “NINJAs”, i.e. borrowers with No Income, No Job, no Assets who had a history of NOT paying their bills.

When the economy was doing well in 2006 and 2007, banks earned record profits from their toxic assets.

But when economic conditions started to worsen in 2008, those toxic assets plunged in value… and dozens of banks got wiped out.

Now here we go again.

Fifteen years later… after countless investigations, hearings, “stress test” rules, and new banking regulations to prevent another financial meltdown, we have just witnessed two large banks collapse in the United States of America– Signature Bank, and Silicon Valley Bank (SVB).

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Bank Runs. The First Sign The Fed “Broke Something.” By Lance Roberts

Posted on March 14, 2023 | Leave a comment

Bank runs are an ever lurking possibility in a fractional reserve banking system. From Lance Roberts at realinvestmentadvice.com:

With the collapse of Silicon Valley Bank, questions of potential “bank runs” spread among regional banks.

“Bank runs” are problematic in today’s financial system due to fractional reserve banking. Under this system, only a fraction of a bank’s deposits must be available for withdrawal. In this system, banks only keep a specific amount of cash on hand and create loans from deposits it receives.

Reserve banking is not problematic as long as everyone remains calm. As I noted in the “Stability Instability Paradox:”

The “stability/instability paradox” assumes that all players are rational and such rationality implies an avoidance of complete destruction. In other words, all players will act rationally, and no one will push “the big red button.“

In this case, the “big red button” is a “bank run.”

Banks have a continual inflow of deposits which it then creates loans against. The bank monitors its assets, deposits, and liabilities closely to maintain solvency and meet Federal capital and reserve requirements. Banks have minimal risk of insolvency in a normal environment as there are always enough deposit flows to cover withdrawal requests.

However, in a “bank run,” many customers of a bank or other financial institution withdraw their deposits simultaneously over concerns about the bank’s solvency. As more people withdraw their funds, the probability of default increases, prompting a further withdrawal of deposits. Eventually, the bank’s reserves are insufficient to cover the withdrawals leading to failure.

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SHTF Survival: 10 Disturbing Threats That You’re Probably Not Ready For. (When the power lines go down, and the radio stations stop transmitting, there’s one line of communication that will still be alive and well.) By Klark Barnes

Posted on March 14, 2023 | Leave a comment

You can’t do too much research and you can’t be too prepared in a SHTF situation. From Klark Barnes at earlking56.family.blog:

When planning for a SHTF Survival situation, there is really only one thing that you can be absolutely sure of: Survival is going to be a much bigger and tougher challenge than you ever thought possible. While there are some things you can do to prepare yourself for the chaos ahead, the reality of the situation is that when things go bad, there are going to be things happening that none of us prepared for or could have ever imagined.

What is SHTF?

SHTF has multiple survival meanings, but the acronym itself means Shit Hits The Fan. The meaning is pretty straight forward, but basically, it’s just a prepper/survivalist’s way of saying that during a long term survival crisis or collapse of society things are going to get bad, real bad! How bad none of us really know, and what dangers we will face is only speculation at this point, but one thing we do know for sure is that most people have no real clue to the dangers they will face during a collapse scenario.

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